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Keiretsu
A keiretsu (系列, system, series, grouping of enterprises, order of succession) is a set of companies with interlocking business relationships and shareholdings. It is a type of business group. The keiretsu has maintained dominance over the Japanese economy for the greater half of the twentieth century.Keiretsu Definition - What is Keiretsu? The member companies own small portions of the shares in each other's companies, centered on a core bank; this system helps protects company managements from stock market fluctuations and takeover attempts, thus enabling long-term planning in innovative projects. It is a key element of the automotive industry in Japan. History The corporate governance of Japan dates back to the 1600s, much of which was propelled by the formation of the Meiji Restoration in 1866 by the Japanese government, the same time when the world entered the Industrial Revolution. These formations were termed zaibatsu.Understanding Japanese Keiretsu Prior to the war Japan remained dominated by four major zaibatsus:Mitsubishi, Sumitomo, Yasuda and Mitsui. They focused on steel, banking, international trading and various other key sectors in the economy, all of which was controlled by a holding company. Apart from this, they remained in close connection to influential banks that provided funding to their various projects.Evolution of Keiretsu and their Different Forms The prototypical keiretsu appeared in Japan during the "economic miracle" following World War II. Before Japan's surrender, Japanese industry was controlled by large family-controlled vertical monopolies called zaibatsu. Under this system, large industrial corporations paved the way for banks and trading companies sit on top of the organizational pyramid controlling all financial operations and distribution of goods. Collapse of the zaibatsu The zaibatsu had been viewed with some ambivalence by the Japanese military, which nationalized a significant portion of their production capability during World War II. Remaining assets were also highly damaged by the destruction of the war. Under the American occupation after the surrender of Japan, a partially successful attempt was made to dissolve the zaibatsu. Many of the economic advisors accompanying the SCAP administration had experience with the New Deal program under President Franklin Delano Roosevelt, and were highly suspicious of monopolies and restrictive business practices, which they felt to be both inefficient, and to be a form of corporativism (and thus inherently anti-democratic). During the occupation of Japan, sixteen zaibatsu were targeted for complete dissolution, and twenty-six more for reorganization after dissolution. Among the zaibatsu that were targeted for dissolution in 1947 were Asano, Furukawa, Nakajima, Nissan, Nomura, and Okura. Their controlling families' assets were seized, holding companies eliminated, and interlocking directorships, essential to the old system of inter-company coordination, were outlawed. Matsushita (which later took the name Panasonic), while not a zaibatsu, was originally also targeted for dissolution, but was saved by a petition signed by 15,000 of its unionized workers and their families.Morck & Nakamura, p. 33 However, complete dissolution of the zaibatsu was never achieved, mostly because the United States government rescinded the orders in an effort to re-industrialize Japan as a bulwark against Communism in Asia. In his 1967 memoirs, George F. Kennan wrote that aside from the Marshall Plan, setting the "reverse course" in Japan was "the most significant contribution he was ever able to make in government." George F. Kennan, Memoirs, 1925-50 (Boston, 1967), 393. Zaibatsu as a whole were widely considered to be beneficial to the Japanese economy and government, and the opinions of the Japanese public, of the zaibatsu workers and management, and of the entrenched bureaucracy regarding plans for zaibatsu dissolution ranged from unenthusiastic to disapproving. Additionally, the changing politics of the Occupation during the reverse course served as a crippling, if not terminal, roadblock to zaibatsu elimination. Even until today, banks and trading companies have been at the top of the pyramid, having access and control over a portion of each company's part of the keiretsu. Shareholders succeeded over the family control of the cartel. This was made possible with relaxing of Japanese laws whereby holding companies could become stockholding companies. Types of keiretsu Cartels and groupings of various kinds are common in Japan. There are two types of keiretsu # Horizontal keiretsu # Vertical keiretsu These two broad types can be further categorized * * * Horizontal keiretsu The primary aspect of a horizontal'' keiretsu'' (also known as financial keiretsu) is that it is set up around a Japanese bank. The bank assists these companies with a range of financial services. The leading horizontal Japanese keiretsu, also referred to as the “Big Six” include: Fuyo, Sanwa, Sumitomo, Mitsubishi, Mitsui, and Dai-Ichi Kangyo bank groups. Horizontal keiretsu may also have vertical relationships, called branches. The linkage of these corporate groups through ownership of long-term equity and production activities, leads to emergence of vertical keiretsu.Japanese Keiretsu - International Business - a Wikia wiki Vertical keiretsu Vertical keiretsu (also known as industrial keiretsu) are used to link suppliers, manufacturers, and distributors of one industry. One or more sub-companies are created to benefit the parent company (for example, Toyota or Honda). Banks have less influence on distribution keiretsu. This vertical model is further divided into levels called tiers. The second tier constitutes major suppliers, followed by smaller manufacturers, who make up the third and fourth tier. The lower the tier, the greater the risk of economic disruption; moreover, due to low position in the keiretsu hierarchy, profit margins are low.What is Keiretsu? Nature of the keiretsu At the epicenter, the "big six" keiretsu is a bank and a trading company. Japanese banks are allowed to have equity in other firms with a Quota of less than 5% of the total number of shares issued by the company (Anti-Monopoly Law Reform of 1977). Banks play a crucial role in the smooth functioning of this organization. They assess the investment projects and provide loans when required. The trading companies deal in imports and exports of an assorted range of commodities throughout the world. Each major company has its own "President's Club", enabling interaction of core members to better help decide their strategies. The Japanese keiretsu took various preventive measures to avoid takeovers from foreign companies. One of them was interlocking or cross-holding of shares. This method was established by Article 280 of Commerce Law. By doing so, each company held a stake in the other's company. This helped reduce the pressure on management to achieve short-term goals at the expense of long-term growth. Besides that, interlocking of shares serves as a tool for monitoring and disciplining the group's firms. The level of group orientation or strength between the member companies is determined by the interlocking shares ratio (the ratio of shares owned by other group firms to total shares issued) and the intra-group loans ratio (the ratio of loans received from financial institutions in the group to total loans received). Industries such as banking, insurance, steel, trading, manufacturing, electric gas and chemicals are all part of the horizontal keiretsu web. The member companies follow the One-Set Policy whereby the groups avoid direct competition between member firms. The One-Set Policy:The Keiretsu of Japan In the 1920s, government officials maintained close relations with the zaibatsu, and the roots of their influence still hold strong. The keiretsu have great influence on Japanese industrial and economic policy. The preferential buying habits of the keiretsu kept foreign investors and foreign goods out of their markets, which America criticized as "barriers to free trade". This enabled the keiretsu to enjoy monopoly privileges over the Japanese market, thus maintaining high prices for their goods, as they had full dominance over the price and distribution of products and services throughout the supply side. It is believed that due to this practice, Japan in the late 1980s imported far less than what they should have($40 billion less as per a report by the Brookings Institution). In such a work environment, the probability of an employee to remain working in the same company for his entire working life was very high. Moreover, this framework allowed rapid co-operative development (Sharing vital information, reduction in cost of R&D and higher quality products) of the keiretsu. In Japan During the occupation of Japan, under the Supreme Commander of the Allied Powers, General Douglas MacArthur, a partially successful attempt was made to dissolve the zaibatsu in the late 1940s. Sixteen zaibatsu were targeted for complete dissolution, and twenty-six more for reorganization after dissolution. However, the companies formed from the dismantling of the zaibatsu were later reintegrated. The dispersed corporations were re-interlinked through share purchases to form horizontally-integrated alliances across many industries. Where possible, keiretsu companies would also supply one another, making the alliances vertically integrated as well. In this period, official government policy promoted the creation of robust trade corporations that could withstand heavy pressures from intensified trade competition. The major keiretsu were each centered around one bank, which lent money to the keiretsu member companies and held equity positions in the companies. Each bank had great control over the companies in the keiretsu and acted as a monitoring and emergency bail-out entity. One effect of this structure was to minimize the presence of hostile takeovers in Japan, because no entities could challenge the power of the banks. Although the divisions between them have blurred in recent years, there have been nine major postwar keiretsu: Toyota is considered the biggest of the vertically-integrated keiretsu groups.The Toyota Group, the One and Only Horizontal-Vertical Keiretsu The banks at the top are not as large as normally required, so it is actually considered to be more horizontally integrated than other keirutsu. The Japanese recession in the 1990s had profound effects on the keiretsu. Many of the largest banks were hit hard by bad loan portfolios and forced to merge or go out of business. This had the effect of blurring the lines between the individual keiretsu: Sumitomo Bank and Mitsui Bank, for instance, became Sumitomo Mitsui Banking Corporation in 2001, while Sanwa Bank (the banker for the Hankyu-Toho Group) became part of Bank of Tokyo-Mitsubishi UFJ. Generally, these causes gave rise to a strong notion in the business community that the old keiretsu system was not an effective business model, and led to an overall loosening of keiretsu alliances. While the keiretsu still exist, they are not as centralized or integrated as they were before the 1990s. This, in turn, has led to a growing corporate acquisition industry in Japan, as companies are no longer able to be easily "bailed out" by their banks, as well as rising derivative litigation by more independent shareholders. Outside Japan The keiretsu model has not appeared outside Japan, but many non-Japanese businesses are described as keiretsu, such as the Virgin Group (UK) and Tata Group (India). Airline alliances such as Oneworld and the Star Alliance have also been described as keiretsu. Generally, these groups exhibit more top-down management, centralized control or (in the case of airline alliances) looser equity ownership connections than do "true" keiretsu. Banks cited as being central to keiretsu-like systems include Deutsche Bank and the early years of JP Morgan and Mellon Financial/Mellon family in the United States. One economic group, the Colombian Grupo Empresarial Antioqueño, is often described as such. A form of keiretsu can also be found in the cross-shareholdings of the largest U.S. media companies—see Columbia Journalism Review's "Who Owns What" website or They Rule. South Korean conglomerates, called chaebol, are often compared to keiretsu, but the chaebol conglomerations are much more similar to a Western conglomerate like General Electric than pre-World War II zaibatsu. There is an investor organization called Keiretsu Forum in America, which describes itself as the largest network of angel investors in the world. See also *Corporate law *Economy of Japan *Horizontal integration *Monopoly *UK company law *Vertical integration *Zaibatsu References Additional reading *Masahiko Aoki and Hugh Patrick, The Japanese Main Bank System (1994) *Ronald Gilson and Mark J. Roe, 'Understanding the Japanese Keiretsu' (1993) 102 Yale Law Journal 871 *Yoshiro Miwa and Mark Ramseyer, 'The Fable of the Keiretsu' (2002) 11 J. Econ. & Mgmt. Strategy 169 *Kenichi Miyashita & David Russell, "Keiretsu: inside the hidden Japanese conglomerates" (McGraw-Hill 1995) *Bremner, Brian. (1999, March 15). Fall of a Keiretsu. Business Week, issue 3620, 86-92. Retrieved October 27, 2007, from Academic Search Premier database *'Whingeing: Japanese-American Trade'. The Economist 18 May 1991 *http://www.law.harvard.edu/faculty/ramseyer/jemskeiretsu.pdf *http://www.econ.kyoto-u.ac.jp/~ida/3Kenkyuu/4ouyoumicro/2006ouyoumicro/060727flath.pdf *http://research.ecstu.com/km/efile/alliances/vertical_heiretsu.pdf categoria:Proprietà Categoria:Beni di largo consumo